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Divi's Labs plunges 15% in two days on lack of guidance

Divi's Labs plunges 15% in two days on lack of guidance

Divi's Labs plunges 15% in two days on lack of guidance
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By CNBCTV18.com May 24, 2022 4:13:41 PM IST (Updated)

Divi's Laboratories Ltd's shares have fallen around 15 percent in two days on intense selling as the Street sentiment turned negative on the management not giving any guidance for revenue and margin growth for the current financial year despite posting better-than-expected January-March quarter results.

Divi's Laboratories Ltd's shares extended losses on Tuesday, dropping more than 5 percent, hitting a near 13-month low. The pharma stock has fallen around 15 percent in two days on intense selling as the Street sentiment turned negative on the management not giving any guidance for revenue and margin growth for the current financial year despite posting better-than-expected January-March quarter results.

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Divi's Labs net sales came in at Rs 2,495.03 crore in March 2022 up 45.2 percent from Rs 1,718.39 crore in March 2021. The quarterly net profit stood at Rs 882.96 crore in March 2022 up 80.96 percent from Rs 487.93 crore in March 2021. Divi's Labs' EBITDA stands at Rs 1,146.48 crore in March 2022 up 58.75 percent from Rs 722.20 crore in March 2021.
Major brokerages have reduced the target price on the stock citing elevated valuations and concerns over revenue guidance with an exception of Goldman Sachs which has a buy rating with a target price of Rs 4,850.
Jefferies has an 'underperform' rating with a target cut to Rs 3,535 from its previous target or Rs 3,965. It pointed out that financials could come under pressure as Molnupiravir sales dry up.
"In our estimate, Divi's recorded $200m of Molnupiravir sales in FY22, we factor in only $20m for FY23," Jefferies said in a note.
Kotak Institutional Equities gave a 'reduce' rating and cut the target price to Rs 3,500 from an earlier Rs 3,900, indicating flat EPS over FY2022-24E and elevated valuations despite recent corrections.
Bank of America has a 'neutral' rating with a target cut to Rs 4,300 from Rs 4,550 earlier. It said that it "believes deterioration in core revenue will weigh on stock" and "cut FY24 EPS estimate by 9 percent".
"We remain cautious on the near-term outlook due to elevated costs and pricing pressures in the active pharmaceutical ingredients segment coupled with waning COVID-19 opportunities," said ICICI Securities in its report.
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